Blaming the President First: Et Tu Dean Baker?

 Everyone seems to feel it's the President's fault. Well not everyone, but a lot of people. Lot's of Very Serious People. Yesterday you had that absurd piece in the New York Times called literally "Obama's fault.

      http://www.nytimes.com/2013/03/04/opinion/keller-obamas-fault.html?ref=opinion&_r=1&

     Keller's complaint was that Obama failed to take the "high road" and he wasn't willing to do Simpson-Bowles. Yes, the high road. Obama tried that in his first term. Yet even in his first inauguration the Republicans went out at dinner planning to not support anything he suggests even if they liked an idea. Yet Obama is the one failing to take the high road?

     As for Simpson-Bowles, when does it end with this? The reverence of this piece of legislation is out of all proportion. However, the one thing it asks for is considerably more tax revenue than the $600 billion we've obtained until now.

    Jeffrey Sachs has a slightly different gloss on it but he too blames the President. He too thinks he has "failed to lead on entitlement reform." On the one hand he claims to support many things that most liberals including the President do:

     "A true progressive agenda -- and it will come -- should do the following. First, it will make specific proposals for key areas of government (education, technology, infrastructure, training, etc.) based on the government paying its way rather than ramping up massive debts. That will require higher tax revenues as a share of GDP."

    http://www.huffingtonpost.com/jeffrey-sachs/how-obamas-politics-led-t_b_2804992.html

    Hmmm. Paying its own way. Is there an MMTer in the house? He seems to think that we can't do anything until we "pay for it" he probably reasons that a "government is like a family." So Obama is to be faulted according to Sachs because he hasn't raised taxes on the middle class as well as the rich:

     "Obama's budget approach -- far too beholden to tax and spending cuts -- has been in plain view since 2009. (I worried about it from the start. See my Time magazine piece in vof that year for more detail.) To stake out his low-tax position, he has repeatedly proposed budgets that actually slash the share of discretionary spending in national income. People have rarely recognized the contradiction between Obama's progressive speeches and his regressive budgets."

     I wonder if Sachs knows this is a recession. Why should we be trying to balance the budget now? In a recession a deficit is not a necessary evil but a necessary virtue. I also question that we have to raise taxes so much on the non-rich-though it is an interesting argument. In many European countries the tradeoff is a highly regressive tax code that taxes the middle class at much higher levels in exchange for a much more generous social safety net. 

      Yet the structural deficit-the part of the deficit not attributable to the recession is manageable. It's attributable to Bush's tax cuts and the off budget wars that have winded down. 

     Now we have Dean Baker going after the President too. At least he differentiates his own criticism from so much of the rank hackery that has been used to criticize the President. Baker's reasoning is that Obama has failed to educate the American people and the media. 

      "I'm not blaming Obama for the reasons that Bob Woodward came up with in his fantasyland. I am blaming President Obama and his administration for trying to be cute and clever rather than telling the public the truth about the economic crisis. The result is that the vast majority of the public, and virtually all of the reporters and pundits who deal with budget issues, does not have any clue about where the deficit came from and why it is a virtue rather than a problem."

      "The basic story is incredibly simple. Demand from the private sector collapsed when the housing bubble burst. We lost $600 billion in annual demand due to residential construction falling through the floor. We will not return to normal levels of construction until the vacancy rates return to normal levels. Vacancy rates are still near post-bubble record highs."

      http://www.huffingtonpost.com/dean-baker/the-sequester-is-presiden_b_2808247.html

      See, here I think Baker is just expecting too much. I mean the President has enough responsibilities don't you think? He has to wholly educate the public as well? Is it simple? In a way yes. Still that doesn't mean that it will be simple for large parts of the public. I think that Baker is overly optimistic on how much the President can educate people in a few soundbites. The public it's true is kind of blinkered on this. They kind of like the idea of spending cuts but wholly oppose any particular cut.

      So they are basically on the President's side. However, educating them is easier said than done.

      He does make the point that maybe if Obama had back in 2010 talked stimulus he might have by now turned the country around to the idea.

      "As a result we are stuck with an economy that is mired well below full employment. President Obama's top economic advisers from his first term all claim that they understood this point. But they said that they could not get a bigger stimulus package through Congress."

     "That assessment may well be true, but the real issue is what President Obama did after the stimulus package passed. He could have told the country the truth. He could have said what all his advisers claim they told him at the time: the stimulus was not large enough and we would likely need more. He could have used his presidency to explain basic economics to the public and the reporters who cover budget issues."

      "He could have told them that we need large deficits to fill the hole in demand that was created by the collapse in private sector spending. He could have shown them colorful graphs that beat them over the head with the point that there was very little room for investment to expand even under the best of circumstances."

     "He could have also explained that consumers would not go back to their bubble levels of consumption since the wealth that had supported this consumption had disappeared with the collapse of the bubble. The public would likely understand this point since most homeowners had themselves lost large amounts of equity and understood that they were much poorer as a result of the collapse of the bubble."

     "In this context the only choice in the near term is between larger budget deficits and higher unemployment. The people who clamored for cuts in government spending and lower deficits are in fact clamoring to throw people out of work and slow growth."

     "We will never know if President Obama could have garnered support for more stimulus and larger deficits if he had used his office to pound home basic principles of economics to the public and the media. But we do know the route he chose failed."

     "He apparently thought the best route to get more stimulus was to convince the deficit hawks that he was one of them. He proudly announced the need to pivot to deficit reduction after the passage of the stimulus and then appointed two deficit hawks, Erskine Bowles and Alan Simpson, to head a deficit commission."

     Hindsight is 20-20. Could he have gone that route? I'm not so sure. By 2010 with the passage of ObamaCare he had spent most of his political capital. Once the election "shellacking" that year it certainly was. At that point the GOP did have something of a mandate for their agenda-they overplayed their hand massively, of course. 

     At this point then, who can really say "what if?" Hopefully he has a winning strategy for now. It's a little unclear exactly what the endgame on this sequester is now as Jonathon Bernstein notes. 

     http://www.washingtonpost.com/blogs/plum-line/wp/2013/03/04/lots-of-questions-linger-about-budget-wars/

      Still, when assessing the President's performance you have to factor in that we haven't had a double dip as they have in Britain, the Eurozone, and Greece. He has a lot to do with that.